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The EUR/USD finished the day sharply lower, down 81 pips at $1.2852. However, the main story of the day was the sharp rise in U.S. Treasury yields, which finished at the highest level in a year (10 yr yield rose 16 bps to 2.17%). The catalyst for the move higher appeared to be better than expected economic data out of the U.S., specifically the Consumer Confidence Board number which came in at 76.2 vs. 71.0 forecast.

According to Kathy Lien at BK Asset Management,

at a time when the rest of the world economies are on shaky ground, U.S. economic data continues to surprise to the upside, making the dollar extremely attractive to global investors. Consumer confidence surged to its highest level in 5 years. Thanks to the improvement in the labor market and the persistent rise in stocks, the Conference Board's measure of consumer sentiment rose to 76.2 in May, up from 69. Greater consumer optimism should hopefully translate into stronger consumer spending in the second quarter.

Other analysts were also focused on recent news out of Europe as a reason for the decline. Furthermore, it should be noted we will see more important economic data from Germany in the coming session, including the most recent data on CPI and Unemployment. Given the weak technical set up in EUR/USD after Tuesday's decline, the upcoming data could have a major influence on the pair should it come in below analysts expectations.

According to analysts at NAB Global,

It was a combination of good numbers out of the U.S. and a dour reading on French consumer confidence that gave extra force to the "buy USD" story. French consumer confidence was expected to be little changed in May, but fell a surprisingly large 4 points to hit the lows of the GFC in 2008, giving voice to concerns the French economy is struggling. A measure of Spanish mortgage lending slumped back in March. The FT was running the now familiar story overnight that Brussels will lighten up on its "austerity" response to the euro crisis and allow several of the indebted economies to miss their deficit targets but to deepen broader economic reforms. This is expected out of tonight's EU annual policy recommendations for member countries.

So what are the charts saying after Tuesday's large decline in the EUR/USD? Some analysts are turning toward the short term time frame charts to get a glimpse at certain levels which may be key in determining which direction the EUR/USD may be heading as we near the latter half of the week.

According to Val Bednarik at FXStreet.com,

markets returned to full volume and dollar is the main winner this Tuesday: U.S. consumer confidence upbeat expectations rising to 76.2, highest in over 5 years. The pair felt to a daily low of $1.2851, and found short-term sellers around $1.2880 during the American session, entering Asia with a clear bearish tone according to the hourly chart, as 20 SMA gains bearish momentum above current price while indicators head south below their mid-lines. In the 4 hours chart technical readings turned also bearish, although buyers had been aligned in the $1.2800/40 area lately: price needs to break below this area to confirm a downward continuation, towards $1.2745, past November low, ahead of $1.266.

From a pattern perspective, it should be noted the pair appears to have confirmed a 'bear flag' continuation pattern on the daily with the close below $1.2880. This is a short-term pattern of only 9 days, but has a measured move target of down near $1.2520. Furthermore, should this measured move target be met, it would also help complete a large head & shoulders top pattern on the weekly chart (currently has neckline sitting at $1.2770) which has been in the process of being carved out for the last 10 months and has a measured move target of $1.1770.

Source: EUR/USD Technical Picture Continues To Sour, More Declines To Come?